Frustrated super fund dumps News Corp shares

Business Reporter

A major Australian super fund is dumping its shares in News Corp after a shareholder revolt failed to trigger any change at Rupert Murdoch’s media group.

The $1.7 billion industry fund, First Super, said it would sell down its stake in News Corp in an orderly manner over the next few months after the defeat of proposals at last year’s AGM for a more independent board.

Investors put forward resolutions - supported by major institutional investors across Australia the UK and US - that would see Mr Murdoch replaced by an independent chairman, a simple majority votes on all resolutions, and the elimination of the company's dual-share structure.

The latter has ensured the Murdoch family control 40 per cent of the company's votes despite owning just 12 per cent of News Corp through their ownership of Class B common stock, which holds the voting rights.

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It was further enhanced in April by the fact that non-US owners of Class B shares have effectively had their voting rights halved to comply with US restrictions on foreign ownership of broadcast licences.

News Corp's board said it planned to oppose the three resolutions proposed by investors and backed the present structure that entrenches the control of the Murdoch family.

First Super’s co-chairman Michael O’Connor said that the failure of proposals to introduce an independent News Corp chairperson - in place of Mr Murdoch - and more independent directors meant that the inadequacies of the company’s governance structure would continue. He said the risks that posed for investors were unacceptable.

"Open, transparent, representative governance is not only overdue but essential for improved risk management within the company. Further, the interests of minority shareholders have too often been compromised. But these issues are apparently of no concern to Rupert Murdoch, so our board decided to take his advice and sell down our shareholding," Mr O’Connor said.

Mr O’Connor noted that one of the consequences of the poor governance structure was that News Corp executive salaries were amongst the highest in the world.

"News Corp executives are paid outrageous amounts of money. The aggregate cash pay of their top six executives last year was $US65.5 million, more than three times the amount received by the top nine executives of BHP Billiton, and they are by no means underpaid" he said. "Our board doesn’t believe that any senior executive is worth four or five hundred times the average salary paid to their employees.’’

First Super told BusinessDay it was still in the process of working out how many News Corp shares it owned.